Though often overlooked, the trucking industry is essential to the health of the US economy. Think about it: without truck drivers delivering goods, interstate commerce would grind to a screeching, tire-burning halt.
Unique Challenges
Despite the importance of trucking companies, the way the system is structured often leaves them in the shaky financial position. Truck companies submit invoices for services rendered, and then often wait 30-90 days for payment on the accounts receivables.
For a bigger company with large cash reserves, waiting to be paid would not be problems. But for small to mid-size companies operating on a decent budget, it might stop an option. Expenses like payroll and gas come in the time between payment, and not paying your drivers is never a good business rehearsal. Add to that rising fuel costs, delays due to traffic congestion, driver shortages and new regulations, and is actually not a recipe for financial hardship.
Therefore, trucking companies often have to show to outside funding. The following are some strategies to trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to implies by which businesses sell their accounts receivables to a factoring company. Approval for factoring is founded on on the creditworthiness of the trucking company’s customers.
At the time of the sale, customer gets 80-90% of your cash back immediately from the statements. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This choices are best for B2B businesses that cannot afford to wait for payment, as well as the cost is frequently 4-5% monthly with a healthy annual price typically between 18-30%.
Bank Loans
Though in order to find come by, bank loans are often the cheapest type of financing. Mortgage process involves an application and breakdown of the company’s creditworthiness and financial history. Small companies especially will usually be denied for loans, although exceptions do live.
After approval, fund disbursement usually takes about 30-90 days achieve a trucking company’s savings. This form of funding ideal for for trucking outfits having a great credit record and do not require the money immediately.
Cash-Advances
Cash advances take place when a small-business receives a loan sum during a lender. The company pays the lending company back with percentages associated with their monthly card receipts before the loan (plus a predetermined rate) is repaid. There are a bunch legal limits to the rates, which cannot be changed retroactively. The advantage of cash advances is immediate cash- the time the fastest method for obtaining cash without in order to be a loan shark.
This financing method is better for trucking companies who need immediate cash for any amount of one’s time and have limited financing options. Cost of is usually 20% or older.
Lease-Back
A trucking company may wish to sell property, plant, and/or equipment, and simultaneously leases it back for earnings.
It ideal for trucking companies with valuable plant or equipment assets which have been underutilized, and the cost is monthly lease payments in addition to depreciation and tax burdens of machines.
Choices, Choices
Every trucking company is unique, however it is almost them to locate funding solutions that meet their individual needs. Being informed on all options is one step toward finding a suitable cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
Posted on:
September 18, 2019